Thales Warns Coface About Potential Globalstar Default

[Satellite TODAY Insider 06-12-12] Thales Alenia Space may soon stop working on six Globalstar satellites scheduled for launch this fall as the mobile satellite service provider faces a default on its Coface-backed loan, according to documents the satellite manufacturer submitted June 11 with the French export-credit agency.

Thales Alenia Space said the filing itself could prompt a wider finding of default by Coface and the French financial entities that guaranteed the loan. In a filing Globalstar recently submitted with the U.S. Securities and Exchange Commission (SEC), the company could be forced to consider strategic alternatives, including Chapter 11 bankruptcy protection.

Globalstar has launched 18 of the 24 second-generation mobile communications satellites built by Thales Alenia Space, with the six remaining spacecraft waiting at Thales Alenia Space’s Rome facility for replacement momentum wheels. The original momentum wheel hardware was blamed delays in the launch of the subsequent spacecraft.

The relationship between Thales Alenia Space and Globalstar was tested in May,when the manufacturer received a favorable ruling in a commercial arbitration that was filed by Globalstar in 2009. The arbitrators in the case ruled that Thales had no further obligation to manufacture or deliver satellites under the third phase of a contract that provided an option for Globalstar to purchase up to 23 second-generation satellites in addition to the 25 satellites it purchased in the first two phases under the contract. The arbitrator also ordered Globalstar to pay Thales approximately 53 million euros ($67.2 million) in termination charges by June 9, 2012.

At the time of the ruling, Globalstar Chairman and CEO Jay Monroe said both companies had initiated post-ruling discussions to seek mutually agreeable solutions that neither include financial penalties for Globalstar nor threaten ongoing work.

“No assurance can be given that we will be successful in reaching agreement with Thales as to the construction agreement,” Globalstar said in a company statement. “If the parties are not able to reach a mutually agreeable resolution or if Thales terminates the construction agreement, there are likely to be materially negative consequences to Globalstar.”

Globalstar amended its Coface export credit facility agreement in March to significantly extend the initial principal repayment date beyond 2012. Globalstar’s first repayment date will now be as late as June 2013 instead of June 2012. The precise date is dependent on the date of Globalstar’s fourth launch of second-generation satellites.

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